China takes surreptious path to tech advances

Edward Wong and Didi Kirsten Tatlow, June 9, 2013,The New York Times :,

Jun 09 2013, 23:12pm ist

updated: Jun 09 2013, 23:12pm ist

Emphasis on technology theft has made some Chinese-Americans fearful of persecution.

A government-financed research institute in the Pearl River Delta here boasts an impressive range of specialties, from robotics to nanomedicine to magnetic resonance imaging.

But not all the cutting edge developments may be the result of indigenous innovation, according to US prosecutors, who last month charged three Chinese scientists at the New York University School of Medicine with taking bribes to share research findings with their real employers: the Shenzhen institute and a separate Shanghai medical technology company.

Though considerable attention has been focused on Chinese cyberespionage efforts, the institute is at the vanguard of a related push to bolster China’s competitiveness by acquiring overseas technology directly from Chinese scientists working in the United States and other developed countries, say US officials and analysts.

Those scientists are heavily recruited to return to China or, in some instances, to share their knowledge while remaining overseas, according to the federal court case and a book released last month by three experts who do China research for the US government.

In advance of a summit meeting in California later this week between President Barack Obama and President Xi Jinping of China, the two countries agreed to hold regular meetings on the issues of cybersecurity and commercial espionage. But there is no sign yet of what those discussions might accomplish.

The authors of the new book, “Chinese Industrial Espionage,” say that technology transfer is an official policy at all levels of the Communist Party and the state. It often takes place in a legal gray area, since laws governing technology transfer can be vague or nonexistent.

The authors warn that the US and other nations need to acknowledge the extent of the Chinese campaign, which they say far exceeds those of other countries and threatens US competitiveness.

They contend that the scale of China’s efforts to gather overseas technology is so immense that the National Counterintelligence Executive, a federal agency, has considered issuing separate annual reports each year: one for China and one for the rest of the world.

“China is in a different league altogether, exceeding the international norm not just in scale, the number and variety of transfer venues, the moral agnosticism of its practitioners, and the degree of government support,” the authors, William C Hannas, James Mulvenon and Anna B Puglisi, said in written answers to questions. “It’s an entire mindset.”

China’s strategies range from setting up science parks for Chinese returnees to persuading foreign companies to open research centers in China, they said.

A private intelligence company in the Washington area, Defense Group Inc., which employs Mulvenon, says the government-financed center that the NYU scientists are accused of being part of, the Shenzhen Institutes of Advanced Technology, recruits overseas Chinese with technical knowledge.

It also says the Shenzhen center “has sought to develop collaborative relationships with foreign companies and research organisations which display high potential for technology transfer.”

A spokeswoman for the Shenzhen center said it was investigating the accusations in the NYU case. A lawyer for Yudong Zhu, an associate professor in the NYU radiology department and the lead scientist charged, said the government “has drawn some erroneous conclusions from some of the evidence they have observed” and that Zhu did not work for the Shanghai company.

The Commission on the Theft of American Intellectual Property concluded in May that technology theft amounted to a loss of more than $300 billion a year, the equivalent of total annual US exports to Asia. “Virtually every sector and technology is attacked,” the commission said.

“National industrial policy goals in China encourage IP theft, and an extraordinary number of Chinese in business and government entities are engaged in this practice,” said the report by the commission, which was led by Dennis C. Blair, a former director of national intelligence, and Jon M Huntsman Jr, a former ambassador to China.

The Chinese Foreign Ministry and the State Council, China’s Cabinet, declined to comment for this article.

In early May, the Commerce Ministry denied accusations by the US. Trade Representative that China was weak on enforcing intellectual property rights. “The Chinese government attaches great importance to intellectual property protection and has made great progress in areas like intellectual property legislation and enforcement,” it said.

Technical information

Cases like the one at NYU of overseas Chinese scientists and scholars accused of secretly transferring technical information are considered rare, especially given that the number of Chinese students going abroad reached 400,000 last year.

The growing emphasis in the US on technology theft by China has made some Chinese-Americans and overseas Chinese fearful of undue persecution. They point to the fiasco of the Wen Ho Lee case, in which a Chinese-American scientist was wrongly accused by federal officials of stealing classified nuclear-related documents.

Frank H Wu, dean of the Hastings College of the Law at the University of California and a member of the Committee of 100, a Chinese-American advocacy group, urged Americans not to judge people on their ethnicity.

Some foreign economists say Chinese institutions have been unable to capitalise fully on technical knowledge acquired from overseas Chinese. A notable financial failure is Suntech Power, one of the world’s biggest solar-panel makers, whose main subsidiary declared bankruptcy in March. Its founder, Shi Zhengrong, was an overseas scientist who had gotten Australian citizenship and had several patents to his name before deciding to return to China to start a business. The city of Wuxi had lured him there with a $6 million initial investment in his company.

There are overseas Chinese associations in the technology field that are transparent about their ties to Chinese institutions and government agencies. One such group is the Silicon Valley Chinese Overseas Business Association, whose stated goal is to promote the business interests of its members, some of whom hold posts as technical advisers in Chinese ministries and universities. The president, Dongping Daniel Zhu, founded Zaptron Systems, which specializes in analysis of the Chinese stock market. The group has laboratories in Shanghai and Dalian.

An online biography says Zhu, who has a PhD in electrical engineering from Virginia Tech, has been invited every year since 1995 by Chinese ministries and local governments to give seminars and consult with industrial and high-tech parks in China.

The authors of the industrial espionage book said they were not trying to put overseas Chinese under unfair scrutiny; rather, they want the US government and US companies to be aware of the sophistication of China’s efforts.

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